Channel 4 handed millions in bonuses as TV ad market falters amid coronavirus

At a Glance:

• Channel 4 has handed millions in bonuses to staff as it contemplates the cost-cutting measures to cope with the hit to ad revenue caused by the coronavirus pandemic.

• Channel 4 will announce this week a range of cost-cutting measures for this year, one of which includes a temporary 20% reduction in the salary.

• Channel 4 is under particular pressure during the coronavirus crisis as its £1.1bn in annual revenues is derived almost entirely from advertising.

Channel 4 has paid out millions in bonuses to bosses and staff while opening talks with the government about potentially tapping an emergency £75m credit facility as the coronavirus hammers the TV industry.

The broadcaster, which is publicly owned but funds itself mostly through TV advertising, is estimated to have paid out more than £5m to its 903 staff last month.

The payouts, which include hundreds of thousands of pounds in bonuses each to the chief executive, Alex Mahon, the director of programs, Ian Katz, and the commercial boss, Jonathan Allan, relate to the performance of Channel 4 last year.

It is understood Channel 4 will announce this week a range of cost-cutting measures for this year, one of which includes a temporary 20% reduction in the salary of the executive team and board.

If Channel 4 follows the measures announced by ITV last week, which appears likely, top executives will give up bonuses for this year while staff can expect, at minimum, a pay freeze. It is understood ITV is looking to furlough some staff, and Channel 4 may be forced to do the same.

The 2019 bonus payouts have come at a politically sensitive and commercially dire time for Channel 4.

Learn more: Digital billboard brand marketing budget & strategy

The broadcaster said it was committed to making the bonus payments last month in its February payroll, which was when advertisers in travel-related sectors began to pull TV advertising as the coronavirus spread. At the beginning of March, ITV warned investors of a significant slump in TV ad spending due to the coronavirus.

Later in March, Channel 4, which had about £180m in cash reserves according to the last publicly available figures, raised the prospect of tapping the £75m credit facility during a regular meeting with officials from the Department of Digital, Culture, Media, and Sport and the Treasury. Channel 4 set up the facility in 2018 as a financial backstop for exceptional circumstances.

Learn more: Channel 4 Annual Report 2018 - FINAL

“Channel 4’s variable pay award for 2019 was agreed by the board in January, reflecting the strong progress made last year against corporate objectives,” said a spokesman for the broadcaster. “The award was communicated to all staff in January and was committed through the payroll system in February.”

The bonus awards range from a maximum of 10% of gross salary for a typical staff member to 20% for the head of the department and 50% for the broadcaster’s executive team. It is understood that last year’s payouts failed to hit the maximum award.

Channel 4 is under particular pressure during the coronavirus crisis as its £1.1bn in annual revenues is derived almost entirely from advertising.

According to industry sources, the broadcaster is facing a slump of more than 40% in TV advertising in the second quarter. ITV and Sky, which have more diversified income from TV production and pay subscriptions, are on track for declines of 37% and 34%, respectively. ITV has said that by year-end each 1% decline in advertising revenue it fails to recover post-coronavirus will reduce revenue and profit by £17m.